Constitutional Provisions regarding borrowings by states and centre

Regarding borrowings by states and centre; the following are specific provisions in the constitution.

• The Central government can borrow either within India or outside India upon the security of the Consolidated Fund of India or can give guarantees, but both within the limits fixed by the Parliament. We note here that no such law has been passed by parliament to fix such limit.
• A state government can borrow within India (not abroad) upon the security of the Consolidated Fund of the State or can give guarantees, but both within the limits fixed by the legislature of that state.
• Central government can make loans to any state or give guarantees in respect of loans raised by any state. Any sums required for the purpose of making such loans are to be charged on the Consolidated Fund of India.
• A state cannot raise any loan without the consent of the Centre, if there is still outstanding any part of a loan made to the state by the Centre or in respect of which a guarantee has been given by the Centre.